Gear & Gadgets —

NVIDIA launches investment arm to stimulate GPGPU demand

Instead of sitting on its cash and waiting for the lights to come back on, …

"If you build it, they will come" is a great tag line for a movie, but you can't run a business that way, especially one as capital-intensive as semiconductors; sometimes you have to build it, then go the extra step of investing in the creation of new, self-sustaining demand. Just ask Intel, a chip company that spends quite a bit of money investing in all sorts of technologies and business that don't at first glance appear to be directly related to its core business of making microprocessors and chipsets. But by investing in WiMAX and other networking technologies, for instance, the company is attempting to stimulate demand for the processors that go at the endpoint of each network link by growing the number and utility of such links in the world. The same can be said of Google's investments in alternative energy—the search giant has estimates of how many milliwatts they spend per query, and they'd love to see those costs go down.

Viewed in this light, NVIDIA's announcement today of its "GPU Ventures Program" is an obvious move, especially for a company that wants to diversify out of the horrifically battered consumer high-end PC market. NVIDIA describes the program as "a new global initiative whose aim is to identify, support and invest in early stage companies leveraging the GPU for visual and other computing applications." The idea here is not only demand creation, but demand creation in a particularly profitable market segment.

Right now, NVIDIA's high-performance computing business is a very small fraction of its bottom line. The bulk of the company's (erstwhile) revenues came from a mix of lower-margin volume products, like integrated graphics processors and low-to-midrange GPUs, and higher-margin niche products, like very high-end GPUs. NVIDIA's Tesla products, which are essentially repackaged high-end GPUs sold at even higher mark-ups as data-parallel coprocessors, fill a very small but lucrative niche, and one that NVIDIA would love to see expand.

Hence the GPU Ventures Program, which NVIDIA hopes will do more than just stimulate demand for its products—mere "stimulation" is what advertising is for. Rather, NVIDIA would ideally like to create new businesses and even new market segments with an appetite for data-parallel floating-point processor power. And, of course, if the companies that NVIDIA invests in are profitable in their own right, all the better.

NVIDIA has launched a website to promote the program, and it even has an online application process for submitting a business proposal. Presumably if NVIDIA likes your proposal, it could consider investing.

While it's clear that an investment program like GPU Ventures is a good idea, one has to question the wisdom of doing it right now. At a time when most companies in NVIDIA's position—tanking revenues and significant, ongoing exposure to a very hard-hit market with grim near-term prospects—are hoarding cash just to keep the lights on, NVIDIA has obviously decided to do the opposite. Whether this is evidence of boldness or desperation is hard to say, but we may get further clarity on that point at the end of the quarter when their results are out and we can get an updated look at the company's balance sheet.